San Diego’s Move to DC Plan in Limbo

The California Supreme Court has asked an appellate court to review a proposal approved by voters in 2012 to place new hires in a defined contribution (DC) plan rather than the city’s defined benefit (DB) plan.

Six years ago, voters approved Proposition B, which provided that new hires for the city of San Diego, except police officers, would be place into a defined contribution (DC) plan and imposed a six-year freeze on pay levels used to determine pension benefits.

The measure has faced legal battles since then, according to news reports, and in April 2017, an appellate court ruling reversed a state labor board decision in 2015 that concluded the city was legally required to conduct labor negotiations before placing Proposition B on the ballot. Now, the California Supreme Court has agreed with the state labor board decision.

In labor board’s decision, it ordered San Diego to make employees hired since 2012 whole by compensating them for the loss of pensions and paying them interest penalties of 7%. According to news reports, when the appellate court overturned that decision last year and ruled the city had acted legally when placing the pension cuts on the ballot, the appellate judges didn’t evaluate the proposal to make employees whole. In its decision, the California Supreme Court has ordered the appellate court to evaluate it and to take judicial steps to reverse Proposition B because the city did not confer with the labor unions before putting the proposition on the ballot.

San Diego Mayor Kevin Faulconer said the ruling leaves Proposition B in place until the appeals court acts.

Based on the labor board proposal that the city make employees whole, the actuary for the city’s pension system estimated in late 2015 that it would cost the city $20.1 million for 1,600 employees hired without pensions at that point. But the number of employees hired without pensions has increased to more than 4,000 since then, according to the San Diego Union Tribune. Former Councilman Carl DeMaio said the remedy could be as small as a fine for not meeting and conferring, or as big as overturning part or all of Proposition B, the newspaper said.